News Analysis

Why Elites Do Business with Criminals in Honduras

In early June, four months before the US released an indictment against Jaime Rosenthal and three others, InSight Crime sat down with Jaime and his daughter to discuss why one of the wealthiest and politically connected families in Honduras did extensive business with the Cachiros, once one of the region’s most powerful drug trafficking clans. The answer, it turns out, is pretty simple: it was good business.

The office is located on the second floor of a nondescript, concrete office building alongside an aging strip mall in San Pedro Sula, the country’s industrial capital known more for its violence than its entrepreneurs. Rosenthal has no bodyguards or armored vehicle in front, and the office has no special security or metal detector.

InSight Crime found Rosenthal buried behind an old, wooden desk amidst a sea of family photos and other paraphernalia, reflections of his long life as a businessman and a politician. Rosenthal was vice president, and he, and his son Yani, remain Liberal Party strongmen, although the October 7 US indictment against them may change that equation.

This article is part of an InSight Crime project concerning elites and organized crime in Central America and Colombia. The final reports for this project will be published in the coming weeks.

The bespectacled octogenarian seemed more at ease dealing with difficult questions than his daughter, Patricia, who manages Continental Bank, one of several Rosenthal businesses named October 7 by the US Treasury Department to its "Specially Designated Nationals" (SDN) list, which prohibits others from doing business with these companies or else face sanctions.

The Grupo Continental, or Continental Group, as the Rosenthal’s conglomerate is known, also has interests in cement, real estate, leather goods, insurance, cattle, agro-industrial projects, crocodile skins, tourism, cable television and media, among others, and is considered one of the top business groups in the country.

Patricia Rosenthal had reason to fret: the topic was the Continental Group’s business dealings with the Rivera Maradiaga family. Better known as the Cachiros, the Rivera Maradiaga family had become one of the largest drug transport clans in Central America before the US Treasury Department named them as specially designated targets in September 2013.

Rumors have swirled for years about the Rosenthals’ relationship with the Rivera Maradiaga family, but nothing has ever been written about it, until now. And there were no formal charges against the family until the US indictment was released on October 7.

As the Rosenthals tell it, Santos Rivera Maradiaga, the family patriarch, and his son, Javier, started selling cattle to the Rosenthals' meat packing plant in San Pedro Sula in the late 1970s and early 1980s. Javier would arrive in a truck large enough to carry about a dozen cows. After making the drop, he would sleep on the street in his car, Jaime Rosenthal said.

“And he just got steadily bigger. You look and see a person who starts small and then afterwards gets a little truck, and then another and another,” he explained. “He was doing good business; he was growing.”

The Rivera Maradiaga family set up accounts in the bank, but the Rosenthals insisted that these accounts were in line with their earnings at the time.

“The accounts that they managed were in line with the businesses they had,” Patricia Rosenthal, who is listed as the Vice President of Continental Bank, said.

The big business between the Rosenthals and the Cachiros started in 2006, when the bank lent them money for their cattle and milk businesses.

“That was when we started to have a relationship with them, of loans, and that was when the relations began with the bank,” Patricia Rosenthal explained. “The meat packing plant knew him. They brought more cattle and we said, ‘Look, this could be a good client,’ and we lent to them for the cattle and the dairy farm. The dairy products they sold in [La] Ceiba to a large cattle ranch and the cattle to us and other meat packing plants. For the bank, this was not a bad business, I mean they had good [cattle], they could pay us the buyers directly, all of whom were big.”

The Rosenthals said the Rivera Maradiaga family went through the bank’s due diligence process and paid back their loans with checks, not cash. (See an example of a check signed by Jaiver Rivera Maradiaga below)

Other loans followed, including to the Cachiros’ vast African palm holdings. The Rosenthals say the relationship made sense because their strength is working in agriculture projects. They said that Continental has three branches in Tocoa, the epicenter of Cachiros’ operations during their heyday.

“They were good clients for us,” Patricia Rosenthal said. “Another important thing is that the bank’s strength is in the north, which includes the northern coast, and we are the strongest bank in agriculture and housing. [This is] because the board of directors that presides over the bank has always believed that it is our duty to give back to these areas in Honduras.”

Another loan went to help build the Joya Grande Zoo and Eco-park. The Rosenthals say the Joya Grande loan was profitable and legitimate in every way, but that it is also the one that has hurt their image the most. This is because Leonel Rivera Maradiaga, Javier’s younger brother and the recipient of the loan, put a plaque at the entrance of the zoo commemorating Continental Bank’s support.

“When we analyzed this loan, it was a very good loan, not just for us but for the country. The loan paid itself off and promoted tourism in an area of the country where people normally never went. They did a great job because they started to attract people from all of Central America,” Jaime Rosenthal said. “It’s not a project that they were going to pay with drugs, it was a project that paid itself.”

Many of these loans from the Continental Bank to the Cachiros were subsidized by the government, the Rosenthals said. They say that in other instances the bank was simply an intermediary for contracts between the Rivera Maradiaga’s businesses and the financiers, which included, but were not limited to, government contracts.

The Rosenthals’ story loses its thread a little bit when you start to drill down into when the family knew the Cachiros were, in fact, the Cachiros. Despite their years of doing business together, the Rosenthals say they did not know the Rivera Maradiaga family was involved in drug trafficking and other nefarious activities until the US Treasury declared them targets in September 2013.

“We had no reason to believe that they were as devious as they turned out to be,” Jaime Rosenthal said.

The announcement by the Barack Obama administration in September 2013 lent a sense of urgency to the Rosenthal family’s business decisions, they said.

“That is when we realized it, when Obama said it,” Patricia Rosenthal said. “Because there was no document or anything that said they were involved in drug trafficking.”

The Rosenthals said nothing showed up about drug trafficking activities when they did their due diligence, and they added that they have opened up all their books to the authorities and asked them to review these processes as well. (The Rosenthals also gave InSight Crime a copy of the Continental Group’s most recent annual report.)

“If you see our books, they are huge, with large land holdings that are well cared for with everything in order. What I am saying is that their people came and reviewed it, and everything was fine,” Patricia Rosenthal said.

“They have never shut us down. I mean the things that [the government] did against the criminals, that was never against us,” Jaime Rosenthal added.

However, the Rosenthals admit they had heard rumors about the Cachiros well before the US Treasury designation. And by early 2012, the Rosenthals were clearly worried: In March of that year, 18 months before the US Treasury Department officials mentioned the Cachiros by name, Jaime Rosenthal wrote a letter to US Ambassador Lisa Kubiske. (See a partial copy of the letter below)

“In Banco Continental, S.A. we are and want to be very careful about our business and our customers,” the letter, which the Rosenthals shared with InSight Crime, begins. “Since Grupo Continental is involved in many businesses including agro-business, we have to be especially careful about the people with whom we do business.”

The letter does not mention the Rivera Maradiaga family by name, but it does ask the United States for assistance in doing due diligence.

“To us a clean name is very important,” it says. “And since the DEA (Drug Enforcement Administration) and the US Embassy are the best informed people in Honduras, we will very much appreciate it that we can confirm with DEA some of the names of our customers to make sure that we will not get involved in any business that can damage the name of our family.”

The Rosenthals assumed the same defense during the interview with InSight Crime. Put simply, they said it is not possible to check all of their clients’ records.

“The big lesson is that we need the United States to help us,” Jaime Rosenthal said. “We don’t have the capacity. I mean we do what we can but we don’t have an investigative unit to see if a client is involved in this [criminal activity].”

“No bank has it. That is why the banks are getting fined,” Patricia Rosenthal added. “What the bankers do is determine if the person has the ability to pay.”

When should it become the bank’s responsibility?

“Our obligation should be if there was a person who was responsible that if we got information, we could give it to that person, and they could review it; they had the capacity to review it and say, ‘It’s not true. It’s an urban myth,’ or, ‘It’s true. Don’t do business with them,’” Jaime Rosenthal responded. “But what we have now is that they are waiting for us to determine who is a criminal and who is not a criminal. That is what the State is for, what the government is for. That is not the bank’s role, not the individual [citizen’s] role. That is why the State was created.”

The Rosenthals say Continental Group is still linked financially to the Cachiros because the government’s seizures have tied up their loans in a lengthy legal process.

“We have not done anything illegal,” Jaime Rosenthal insisted.

*The research presented in this article is, in part, the result of a project funded by Canada's International Development Research Centre (IDRC). Its content is not necessarily a reflection of the positions of the IDRC. The ideas, thoughts and opinions contained in this document are those of the author or authors.

We also encourage readers to copy and distribute our work for non-commercial purposes, provided that it is attributed to InSight Crime in the byline, with a link to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

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dedicated to the study of the principal threat to national and citizen security in Latin America and the Caribbean: organized crime. We seek to deepen and inform the debate about organized crime in the Americas by providing the general public with regular reporting, analysis and investigation on the subject and on state efforts to combat it.